Bank expected to resist QE calls

The Bank's Monetary Policy Committee is expected to hold interest rates at a record low of half a per cent

The Bank of England is expected to resist calls for further emergency support for the economy in the face of mounting evidence that the recovery is grinding to a halt.

The Bank's Monetary Policy Committee (MPC) is expected to hold interest rates at a record low of 0.5% while its quantitative easing (QE) programme will stay at £275 billion following Thursday's meeting.

The no-change decision will come despite influential think-tank NIESR estimating that economic growth slowed once again in the three months to November to 0.3%, from 0.4% in the three months to October.

Elsewhere, official figures revealing a larger-than-expected 0.7% contraction in industrial production and manufacturing in October have further fuelled fears of a double-dip recession.

The weak figures also follow warnings from Bank Governor Sir Mervyn King that the UK faces a "systemic crisis" and urging banks to brace themselves for a potential eurozone collapse amid fears of a second credit crunch.

David Kern, chief economist at the British Chambers of Commerce (BCC), called for action from the MPC.

He said: "With the Government implementing its tough deficit-cutting measures, and while the eurozone's problems create worldwide banking risks, UK monetary policy must remain as expansionary as possible."

He added: "Given the current economic challenges, we believe that the MPC should announce a further £50 billion increase in the QE programme on Thursday, to £325 billion."

But according to the minutes from the MPC's November meeting, a further cash injection to boost the economy is highly probable but not until next year, as the last £75 billion boost in October will take a couple more months to complete.

Howard Archer, chief UK and European economist at IHS Global Insight, expects the MPC to enact a further £50 billion of QE in both the first and second quarters of 2012, taking the total up to £375 billion.